Monday, May 10, 2010

Anchoring charity donations

More on behavioural economics.

Anchoring is interesting. When we are buying stuff, we're overly influenced by one particular piece of information we are exposed to. There are lots of subtle examples. In their fascinating book Nudge, Thaler and Sunstein explain that charities can influence the amount donors give by how they present the donation options. People will give more if the options are €100, €250, €1,000 and €5,000 than if their options are €50, €75, €100 and €150.

Barry Schwartz gives more anchoring examples in his book Paradox of Choice. If you walk into a suit shop where the suits displayed are €1,500 each, and you see a nice suit for €800, this may seem like a good deal. But walk into a different store where suits are displayed at €500, and the same €800 suit seems very expensive. The pricing information is anchoring your views.

Schwartz gives more examples. For example, a high-end catalogue seller of kitchen equipment was selling an automatic bread maker for $279. Later on, they added another more expensive deluxe version for $429. While they didn't see too many of the deluxe makers, sales of the $279 machine almost doubled.

1 comment:

Conor Byrne said...

Very true and well used by a lot of charities